The Empirical Evidence Conclusively Supports Global Investing

Although there still exits a sense of uneasiness in the stock market about global investing, the above average rate of returns and steady growth of international companies for the past ten years compels prudent investor to invest abroad. The main goal of this work is to examine the performance of foreign companies and compare their risk-adjusted returns to the returns of the US companies. In this process we selected the foreign companies that have been accepted by our financial market and traded in the US as ADR (American Depository Receipts) in NYSE or NASDAQ. Additionally, we have considered only those ADRs that had high volume and outperformed the industry index. Specifically, this study is going to address whether the performance of a global portfolio meets or surpasses the performance of a diversified domestic portfolio. More importantly the emphasis of this work is to determine whether the global portfolios consistently and significantly outperformed the US equity portfolios. The asset selection and the optimization process applied to domestic and international portfolios are identical to maintain consistency and comparability of the results. For each portfolio we used the 2003-2004 daily observations to optimize allocations and we used the 2005-2006 data to evaluate the performance of each portfolio

Do Under-Managed Portfolios Outperform Over-Managed Portfolios?

How often should a portfolio be rebalanced?  This is the question our study attempts to answer.  The Internet stock bubble and its aftermath made portfolio mangers very sensitive to their management styles.  Specifically, they had to reassess how often to evaluate a client’s portfolio.  This work examines the performance of portfolios that were aggressively managed and compares their risk-adjusted returns with those of portfolios that were managed infrequently.  To accomplish this, we change the rebalancing frequency of a well-diversified portfolio and track its performance over time.  This study will not only enable us to determine whether the performance of an actively-managed portfolio surpasses the performance of an under-managed or unmanaged portfolio, but it will also allow us to determine the optimal rebalancing period for maximizing risk-adjusted returns.  The asset selection and portfolio optimization methodologies applied to the portfolios in this study are identical to maintain consistency and comparability of results.  To evaluate the performance of each portfolio, we used daily observations from September 2000 to September 2006 and applied various rebalancing frequencies using the QuantAnalysis application at www.fundsformation.com